The Parliamentary Standing Committee on Finance has sought a “comprehensive examination” and an “appropriate regulatory framework” for Virtual Digital Assets (VDAs), such as cryptocurrencies, in its report on the proposed Securities Markets Code, 2025.

The committee has proposed that, until such a legislative framework is drawn up, the government may consider introducing an interim arrangement through recognised Self-Regulatory Organisations (SROs) functioning under the oversight of a designated regulator, such as the Reserve Bank of India (RBI) or the Securities and Exchange Board of India (SEBI).

Let’s take a closer look at what the House finance panel said.

1. The definition of securities excludes VDAs, creating a ‘regulatory grey area’.

The committee noted that the proposed Securities Markets Code adopts a technology-neutral definition of securities; however, it excludes VDAs that do not satisfy the legal characteristics of securities or derivatives under the proposed framework.

This exclusion creates a regulatory grey area, which, in turn, leads to regulatory uncertainty and exposes investors to heightened risks of fraud, market manipulation, misinterpretation, and inadequate grievance redressal. Furthermore, it creates an environment for regulatory arbitrage.

“Such uncertainty may adversely affect investor confidence and undermine the integrity, transparency and orderly development of the securities market,” the committee said.

It is pertinent to mention that although crypto transactions are taxed in India and crypto exchanges are required to comply with anti-money laundering laws, there is no dedicated law governing aspects such as transparency, governance, disclosure, investor protection and grievance redressal.

2. Many categories of VDAs resemble securities or derivatives, yet remain unregulated.

According to the House finance committee, many categories of VDAs are increasingly being traded and invested in as financial assets. They also exhibit characteristics commonly associated with securities and derivatives, such as:

  • Investment for financial returns
  • Tradability on organised platforms
  • Price discovery through market forces, speculative trading, and leverage
  • In some cases, exposure to the value or performance of an underlying asset or index

Despite these similarities, VDAs are not expressly recognised or regulated under the proposed Code because they do not “independently” satisfy the statutory definition of a security or derivative.

3. Set minimum standards of governance and compliance in VDA sector. In light of the growing popularity of VDAs and increasing retail participation in the sector, the committee proposed establishing a regulatory framework governing cryptocurrencies, NFTs, and other digital tokens.

“Such a framework should prescribe minimum standards of governance, transparency, disclosure, investor protection, grievance redressal, compliance with
prescribed codes of conduct and appropriate regulatory oversight, so as to mitigate risks arising from the existing regulatory vacuum while promoting market discipline and safeguarding investor interests,” the panel said.

VDA regulation proposal is not binding in nature, says CoinDCX founder: Sumit Gupta, co-founder of CoinDCX, told MediaNama that the parliamentary panel’s recommendation is a positive acknowledgment of the need for a “structured approach to governance” in the VDA sector.

However, he noted that the suggestions are merely “advisory” in nature.

“The government may accept, modify, or decline to act on them. This recommendation, while encouraging, does not by itself create a regulatory framework or bind the government to a particular course of action,” Gupta said.

The CoinDCX co-founder also pointed out that the Committee is currently reviewing the regulatory roadmap for VDAs as part of a separate study.

“Until that study is concluded and its findings are published, it would be premature to characterise this recommendation as a definitive shift in India’s regulatory approach. The recommendation, at this stage, is one advisory input into a broader and ongoing policy process,” he said.

Where does the RBI stand on crypto? It is important to note that the Reserve Bank of India (RBI) recently told the Parliamentary Standing Committee on Finance that VDAs, including cryptocurrencies and stablecoins, threaten the economy and should not be granted a legal status.

The RBI had made the following arguments before the panel:

  • Cryptocurrencies are privately issued assets outside central bank control and carry the risk of being used for terror funding and narcotics smuggling.
  • Regulating crypto held by offshore entities is difficult and poses challenges for regulatory authorities.
  • Countries such as Qatar and China have banned crypto activity outright, while European jurisdictions permit it only under stringent regulation.

In February 2026, Rajya Sabha MP Raghav Chadha also called for the legalisation of VDAs in India.

“We currently tax virtual digital assets as if they are legal, but we regulate them as if they are illegal. My solution to this is to heavily regulate it, ring-fence the ecosystem, and strengthen anti-money laundering laws. Prohibition is not protection; regulation is protection,” he said then.

In October 2025, the Madras High Court ordered that cryptocurrencies can be recognised as property under Indian law. 

Also read: